What is the difference between wage differentials caused by differences in human capital and compensating wage differentials?
What will be an ideal response?
Human capital refers to an individual's stock of skills to produce economic value. With higher education and experience, the human capital of an individual increases. Hence, people with a higher level of human capital tend to get higher wages than people with a lower level of human capital. On the other hand, compensating wage differentials arise from the nature of the job rather than the human capital involved. A compensating wage differential is a wage premium paid in order to attract workers to otherwise undesirable occupations.
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a. True b. False Indicate whether the statement is true or false
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What will be an ideal response?
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